Opening Pair-Share
WHAT DO KOBE BRYANT, A 1962 CORVETTE, AND A DIAMOND
HAVE IN COMMON?
Supply and Demand
What is Demand?The willingness to own a product and the ability
to pay for it.
What is Supply?The amount of
goods available.
The Law of Supply and DemandSupply and demand depend on and
respond to price.
If PRICE then, DEMAND and SUPPLY
If PRICE then, DEMAND and SUPPLY
What is the Substitution Effect?When consumers react to an increase
in price, they
1) Consume less of that product
2) Find an alternative
Example: movies vs. Netflix
What is the Income Effect?A change in income will determine if
you buy more or less of a product.
Example: get raise, buy more clothes
What is a Demand Curve?
What is a Supply Curve?
What Causes the S & D Curve to Shift?
If S & D increases, the curve shifts right.
If S & D decreases, the curve shifts left.
What Causes the Demand Curve to Shift?
1. INCOME
Normal Good: Something you buy more of if your income increases. (TV, NEW clothes)
Inferior Good: Something you buy less of if your income increases. (USED clothes, inflatable pool)
2. CONSUMER EXPECTATIONS: Knowing the price will change affects your purchase.
3. POPULATION
EX: Baby boom (need food, clothes, diapers, homes, etc.)
4. CONSUMER TASTES AND ADVERTISING: Changing trends.
5. RELATED GOODSCOMPLEMENTS: Goods
that are bought and used together.
EX: DVD and DVD Player
SUBSTITUTES: Goods used in place of one another.
What Causes Supply to Change?1. Cost of factors of production2. Technology3. Taxes/Govt. policies4. # of firms in the marketplace5. Weather
What is Equilibrium?When Qd=Qs.
What is Excess Demand?When Qd is greater than Qs.
(Shortage)
What is Excess Supply?When Qs is greater than Qd.
(Surplus)
SummaryIN ONE, LONG SENTENCE, MAKE A
CONNECTION BETWEEN SCARCITY, CHOICE, FACTORS OF
PRODUCTION, THE THREE ECONOMIC QUESTIONS, FREE
ENTERPRISE, AND SUPPLY AND DEMAND.
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